Indian government working on guidelines for accommodation aggregators

Mahesh Sharma, the Minister of State for Tourism, said in the Lok Sabha that the government of India has begun working on guidelines for accommodation aggregators, and that “is at an initial stage”. This was in response to a query from MP Bheemrao Baswanthrao Patil of political party Telangana Rashtra Samithi. Patil had asked the Ministry of Tourism whether the government of India intends to “impose guidelines on accommodation aggregators to help ensure safety, security and service standards that home stay owners and hotels registered with them offer”.

Accomodation aggregators in India would include the likes of Softbank funded Oyo Rooms, Hotels.com, AirBnB, FabHotels and Tripvillas, as well as offerings from OTA’s, including MakeMyTrip (including GoIbibo GoStays), Cleartrip, and Yatra.

Accomodation Aggregators?

It’s worth noting that the question posed was regarding “accommodation aggregators”, and not hotel aggregators. This would suggest that the policy would expand beyond the registered entities to also include someone just renting out a room in their apartment for a night, thus including the “sharing economy”, which effectively means the likes of AirBnB. Note that AirBnB, which recently raised $450 Million, recently launched its Trips business in India.

The difference between a sharing economy model and the traditional hotel aggregator model is that it addresses the inability of the traditional (and regulated) service providers to meet demand. This negatively impacts the revenues of the regulated economy, which have high costs of operation, owing to the regulatory costs, and also charge a premium owing to scarcity of supply in the market. The sharing economy addresses this scarcity by allowing anyone to rent out their resources, thus improving supply.

Regulation has a negative impact on the sharing economy, by imposing regulatory costs, which then get transferred to users. Instead of allowing citizens to share unutilised capacity/assets (rooms in house, vehicle, office space, and in future, even surplus electricity generated using solar cells), they’re converting everyone into a merchant. There is precedence here, of course, in case of cab aggregators: In India, Uber is a taxi service with professional taxi drivers, instead of citizens driving for a bit of extra money, like it is in the US. In Maharashtra, each driver has to pay a license fee.

At the same time, regulating those listing their services on aggregators in India has been a demand for a while, given safety and security concerns, especially after the Uber rape case a couple of years ago.

Should accommodation aggregation platforms even be regulated?

As the Minister of State pointed out, the government “has well defined guidelines for approval and classification of home stays and hotels under its voluntary scheme to ensure safety, security and services standards.” This means that home stays and hotels are being regulated, but what is the need to regulate platforms which aggregate these. Note that in the case of taxi aggregators, the consumer really doesn’t have a choice of property: they don’t know which car they’re getting, and the history of the driver. Thus, the argument that an Uber or an Ola is merely a technology platform which allows buyers to discover merchants is incorrect. It can’t be compared with an AirBnB or a Hotels.com, which these allow you to check properties, review customer feedback.

Thus, it doesn’t really make sense to regulate hotels and homestay aggregation platforms: it would be akin to asking Zomato to buy a license to aggregate restaurants which do food delivery.

(a) whether the Government has plans to impose guidelines on accommodation aggregators to help ensure safety, security and service standards that home stay owners and hotels registered with them offer;
(b) if so, the details thereof; and
(c) if not, the reasons therefor?